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11/21/2004

Honduras: Banking on openness and proximity to U.S.

By Paul Blustein
The Washington Post

When Danubia Rodriguez walked away from her rural Honduran village six years ago to accept a textile factory job, it demonstrated the implicit bargain Honduran officials struck in hopes of improving the lot of their country, one of the poorest in the hemisphere.

In the early 1990s, they scrapped inward-looking policies and turned the economy into the most open in Central America and one of the most open in the world, according to the World Bank. Generous tax treatment for foreign factories helped persuade companies such as Sara Lee Branded Apparel, owners of the Hanes line, to invest in places like El Progreso, a town of 97,000 in central Honduras. Shipments of agricultural commodities such as bananas, coffee and shrimp were gradually eclipsed by exports of fabric, garments and other textiles churned out by the new plants, or “maquilas.”

Between 1995 and 2003, employment in the factories doubled from 65,000 to 130,000 — substantial numbers in a country of just 6.8 million.

It was, Honduran officials hoped, the start of a cycle of development and wealth creation whose virtues could be glimpsed in the small steps forward taken by people like Rodriguez.

Life in her village of Las Mangas was difficult. A trip to the doctor or the store, a hunt for a home with electricity to watch a soccer game on television — all required an hour’s trek down tough mountain paths and across a river on foot.

The family house, built by her father, was an earthen-walled structure with a roof made of corrugated zinc and coconut leaves, and only makeshift bathing facilities on the outside.

The family worked from 4 a.m. to 5 p.m. during the coffee harvest, picking, washing and drying beans on a small plot of land.

The village school stopped at sixth grade.

Today, she gestures proudly around the cinder-block home she now occupies in El Progreso. “It has been really hard for me to achieve all this,” said Rodriguez, who most recently worked at a Sara Lee plant for $1.50 an hour.

Though cramped and ramshackle by U.S. standards, the home holds luxuries undreamt of in village life. A gas stove. Indoor plumbing. Television, and the electricity to power it. A diet that has moved beyond rice, beans and tortillas to include regular portions of meat, fish and fresh vegetables.

In areas where maquilas are concentrated, business executives and workers point proudly to signs of modernization supported in part by the spending power of factory workers — American fast-food outlets and family restaurant chains, and even a couple of air-conditioned shopping malls in major urban centers, all of which provide additional employment. Civic officials report that tax revenue from workers’ incomes has helped finance improvements in public services such as trash collection.

Most important, Honduran maquila workers say, their earnings offer hope for their children, because the money enables them to afford the expense of sending kids to high school — the books, supplies, uniforms, transportation and other costs.

Nubia Ramos, a sewing machine operator at a maquila in the western commercial city of San Pedro Sula, said her eldest son, who is 18, never got past the sixth grade “because we didn’t have the resources.”

Since she landed her job four years ago, she and her husband, a security guard, have started sending their second child to high school.

In the case of Honduras, there is some hope that the textile industry can remain competitive.

Though wages are about double those of China, some companies here are expanding, betting that their proximity to the United States, and the more rapid speed to market it allows, will keep them afloat.

“Central America has a huge advantage that China cannot take away — the geographical position we’re in,” said Jesus Canahuati, general manager of Elcatex SA, one of the country’s biggest textile producers. “All the customers have in mind speed to market. No one knows how much sales will be for a particular silhouette; you don’t know how many mediums you’ll need, or how many extra larges, or how many of a particular color.”

Officials are taking no chances, pushing hard for passage of the Central American Free Trade Agreement, which is stalled in the U.S. Congress.

The terms of the pact would give Central American goods duty-free access to the U.S. market, while Chinese makers of textiles and apparel, like those from many other countries, would still face the average 16 percent customs duties.

But CAFTA has drawn stiff opposition from critics who say it does not require industries in Latin American countries to adequately protect labor standards and the environment.

A decade into its deal with the global economy, Honduras’ progress has stalled, with gross domestic product hovering around $930 per person, its school system barely functioning, and the outlook uncertain.